Sally Demling links her digital pedometer to an app on her iPhone before a walk. She has chosen a high deductible insurance policy because of its affordability. She has recently lost 75 pounds in an effort to become more healthy.
Oct. 15, 2013
(Photo: Sam Upshaw Jr.; The Courier-Journal)Buy Photo

An increasing number of U.S. workers, including thousands in Kentucky and Indiana, are finding their employers shifting to high-deductible healthcare plans that require employees to spend thousands of dollars on doctors and prescriptions before insurance starts paying the bills.

But fueled by employers’ increasing desire to cut costs — and a looming tax under the federal Affordable Care Act that will penalize companies for overly generous “Cadillac” plans — the high-deductible plans are expected to continue nudging aside mainstay PPO plans.

High-deductible plans “are a blunt, crude instrument for getting at the problem” employers face of annual double-digit increases in healthcare costs for workers, said Sabrina Corlette, an analyst at Georgetown University’s Health Policy Institute. “The argument is that consumers need skin in the game because they are getting too much healthcare. If you make them feel pain, they will spend less.”

“This was already a significant trend,” before the Affordable Care Act, said Christopher Ryan, vice president of ADP Strategic Advisory Services, an employee-benefits consulting firm for large employers based in Louisville.

Starting in 2018, Obamacare will impose a 40 percent excise tax on the portion of most employer-sponsored health coverage worth more than $10,200 a year for individuals and $27,500 for families, which some have dubbed “Cadillac” plans.

The prospect of those fees, Ryan said, is among factors driving employers to increasingly offload healthcare costs to workers via high deductible insurance plans.

“We advise employers to think about adding high deductible plans”now, he said.

Comparing coverage

PPO health insurance still accounts for 57 percent of employer health plans, according to the Kaiser Foundation’s annual survey of employer health insurance. In a PPO, HMO and other similar insurance plan, workers shell out a co-pay, typically $25 to $50, for medical appointments while the insurance company picks up the rest.

But in a high-deductible plan, the payment burden falls on the consumer. The average consumer pays cash deductibles for all healthcare and medicine until they hit a typical $2,000 deductible, on top of paying monthly insurance premiums in a high-deductible plan, according to the Kaiser report.

On the flip side, most high-deductible plans come packaged with free preventative care — including physicals, routine bloodwork and mammograms; patients don’t even pay a co-pay for those. Most also offer wellness programs, medical hotlines, and online database search tools to help employees shop costs for common procedures and weigh medical needs.

Many high-deductible plans also help consumers pay their own way via direct payroll deposit into pretax “health savings accounts.”

Still, Corlette added, high deductible plans “put the burden on the consumer who has the least tools to navigate the system. It’s really hard to figure out what something costs.”

And the high deductible trend hits as households are already coping with declining wealth as a result of the recession. In 2013 alone, overall family premiums rose four percent higher than 2012 while wages increased 1.8 percent and inflation increased 1.1 percent, according to the Kaiser report.

If their only option for healthcare is to pay cash, some struggling consumers may delay or go without needed care.

“For better or worse, there is strong evidence that when you raise deductibles, people use less health care services,” Corlette said. “For a lot of people, it can be a really bad thing. It means they delay care, or chronic medicine disease they should be on.”

The exchange option

It is too soon to tell whether consumers will move on their own to higher deductible plans options when they purchase insurance via the Affordable Care Act’s state or federal health exchanges.

Officials with the Kentucky Health Exchange, also known as kynect, say they have not analyzed yet which options consumers are choosing for coverage beginning Jan.1.

But once enrolled in such a plan, the effect on healthcare choices is immediate, many consumers say, adding they focus more on getting and staying healthy, while trying to save against catastrophic illness. Some consumers say it is a tough learning curve as they weigh their healthcare needs against dizzying, opaque healthcare costs.

“It is a mind set. The smart thing to do is to take care of yourself and maybe it will all work out. It is a matter of risk,” said 60-year-old Sally Demling, a team leader for the office staff at a busy Louisville orthopedic practice.

She pays a $260 monthly premium for a plan with a $5,000 cash deductible before any co-insurance coverage for medication or healthcare kicks in. She shed her employer’s PPO medical insurance last spring when she changed her job status from full to part-time.

Demling added that she is feeling confident about her well-being, having lost 75 pounds in recent years. As the weight came off, she said she also discarded her old, constant regimen of maintenance medications, including blood pressure medicine and diuretics. Since enrollment in the high-deductible insurance last June, her health remains sound.

Still, she is trying to save more money against the possibility of a medical catastrophe.

“I do have a credit card that I’m keeping just for those occasions. I haven’t had to use it yet. Knock on wood,” Demling said. Years of working in the medical field, she added, have taught her that consumers need to be better educated about their health, their healthcare, and how much it costs. “People need to be responsible for their own bodies and realize that this health insurance question isn’t going away.”

That, employers say, is exactly the point.

“One of the ideas behind the deductible is engaging people to focus on the price,” said Ryan, who counsels employers on the ACA and worker benefits.

For example, a walk-in, retail medical clinic could be cheaper, and more accessible than a physician’s visit. Staffed by nurse practitioners or physician assistants, these clinics cost $60 per visit, on average, compared to $124 at an Urgent Care facility and $127 for a physician’s office, according to the Convenient Care Association, the national trade association of healthcare systems.

Retail medical clinics in stores like Kroger or Walgreens are expected to mushroom from 1,300 this year to 3,000 by 2016, according to the CCA.

Making ends meet

Faced with the unaffordable prospect of an increase from about $450 per month to $600 in monthly premiums for an employer’s PPO plan, Joanna Weiss of Middletown said she chose instead to buy a $200-per-month, high-deductible, consumer-driven plan from Humana last spring for her family of four.

Since then, she said she’s learned how to bargain with her allergist to pay cash monthly for needed shots. She compares the prices posted prominently at retail medical clinics in stores like Kroger around town. She has also memorized which pharmacies, especially those at Meijer and Walmart, offer cheap $4 generic drugs.

And when her 12-year-old son needed counseling, Weiss said she negotiated a cash payment of $80 per session with the therapist. This was an increase from her prior $55 co-pay with PPO insurance.

But Weiss said she also likes the new, no-hassle arrangement. Before she switched insurance, the provider would bill her old PPO plan for a total charge of $130 per visit. Sometimes, she would still get a bill, and have to argue with the insurer.

“I am OK paying $80 upfront and done,” Weiss said. “It saves me from dealing with my insurance over it and endless hassles with the billing.”

By saving monthly on high deductible premiums, Weiss said her family can still afford to take vacations now and then. The family budget also still allows her to work part time as a professional home caregiver for the chronically ill. This allows flexibility to pick her two kids up from school and shuttle them to sports and after school activities.

Nina Kahloon, a Louisville dermatologist who has long had high-deductible coverage, said she believes consumers will eventually adapt to such plans.

Kahloon said she always budgets to pay her maximum $5,000 deductible each year before any insurance coverage begins. Diagnosed with multiple sclerosis four years ago, Kahloon, 47, has come to accept that she’ll easily lay out that much cash for neurology care and exams required to monitor her chronic disease.

She is resigned to the expense, and is confident that Obamacare will eventually yield better healthcare for everyone.

“Healthcare is so broken now. It doesn’t work,” Kahloon said. “I am confident we are all going to be better off.”

Jere Downs can be reached at (502) 582-4669, Jere Downs on Facebook and Jeredowns on Twitter.